Even as college savings have shrunk among the fortunately employed, undergraduate costs have continued to rise a zillion times faster than inflation (much less deflation).
We know how this movie turns out. Emily and I have been expecting the bubble to blow (weddings and houses too - 2007) sometime in the next five years. So today's commentary is right on schedule (emphases mine):
Back at the beginning of the summer, I had a column in this space in which I predicted that higher education is in a bubble, one soon to burst with considerable consequences for students, faculty, employers, and society at large...
... Assume that I’m right, and that higher education - both undergraduate and graduate, and including professional education like the law schools in which I teach - is heading for a major correction. What will that mean? What should people do?
Well, advice number one - good for pretty much all bubbles, in fact - is this: Don’t go into debt...
Right now, people are still borrowing heavily to pay the steadily increasing tuitions levied by higher education. But that borrowing is based on the expectation that students will earn enough to pay off their loans with a portion of the extra income their educations generate. Once people doubt that, the bubble will burst.
So my advice to students faced with choosing colleges (and graduate schools, and law schools) this coming year is simple: Don’t go to colleges or schools that will require you to borrow a lot of money to attend. There’s a good chance you’ll find yourself deep in debt to no purpose. And maybe you should rethink college entirely.
Many people with college educations are already jumping the tracks to become skilled manual laborers: plumbers, electricians, and the like. And the Bureau of Labor Statistics predicts that seven of the ten fastest-growing jobs in the next decade will be based on on-the-job training rather than higher education. (And they’ll be hands-on jobs hard to outsource to foreigners). If this is right, a bursting of the bubble is growing likelier.
What about higher education folks? What should they (er, we?) do? Well, once again, what can’t go on forever, won’t.
For the past several decades, colleges and universities have built endowments, played moneyball-style faculty hiring games, and constructed grand new buildings, while jacking up tuitions to pay for things (and, in the case of state schools, to make up for gradually diminishing public support).
That has been made possible by an ocean of money borrowed by students -- often with the encouragement and assistance of the universities. Business plans that are based on this continuing are likely to fare poorly.
Just as I advised students not to go into debt, my advice to universities is similar: Don’t go on spending binges now that you expect to pay for with tuition revenues later. Those may not be there as expected...
... Finally, for the entrepreneurs out there, this bubble-bursting may be an opportunity...
But a college degree is an expensive way to get an entry-level credential. New approaches to credentialing, approaches that inform employers more reliably, while costing less than a college degree, are likely to become increasingly appealing over the coming decade...Reasonable advice. John Hawks seems to agree. On the other hand, when I first saw pre-Netscape Mosaic in 94 I thought the storm was just years away. Bubbles can grow for a long time.
- Plan B - Skip College - Jacques Steinberg - NYT
- The New Poor - In Job Market Shift, Some Workers are Left Behind - Catherine Rampell
- College Education, Good Jobs: Why Degrees Are Overrated - TIME
- Your Money - Another Debt Crisis Is Brewing, This One in Student Loans - Ron Lieber - NYT
- In the Basement of the Ivory Tower - The Atlantic
- Post-industrial employment: adjusting to a new world (2010)
- Employment in the Great Stagnation (2010)
- The cost of weddings, college education, homes (2007)
- Why college tuition continues to increase: Mankiw (2006, before Mankiw fell)